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Brokerage firms suffer negative earnings surprise in Q4

Major brokerage firms reported worse-than-expected earnings in the fourth quarter of last year, with analysts citing increased market volatility coupled with a slump in the nation’s equity-linked securities market, data released in recent days showed.

Mirae Asset Daewoo’s fourth-quarter net profit dropped 72 percent on-year to 26.9 billion won ($23.9 million), noticeably below the average range of 40 billion-50 billion won projected by analysts. The firm had been reporting lackluster earnings throughout last year. Its annual net profit declined 8.7 percent to 461.2 billion won. 

(Mirae Asset Daewoo)
(Mirae Asset Daewoo)

According to a regulatory filing, NH Investment & Securities’ net profit plummeted 83 percent to 11.7 billion won, missing the projected earnings expectation of 50 billion won by a landslide.

Korea Investment & Securities posted 87.4 billion won, down 28.9 percent on-year. Its annual net profit declined 5.2 percent to 498.3 billion won.

Samsung Securities dropped 38 percent to 37.6 billion won, but was able to save face by posting an annual net profit of 334.4 billion won -- a 23 percent increase on-year.

KB Securities announced net loss of 32.4 billion won, and its annual net profit inched down 34.2 percent from the previous year.

“With a decline in stock indexes, the cost for hedging ELS soared and overall outcome of the firms’ management of hedge funds and personal investment has been lackluster,” Shin Dong-han, an analyst at Hana Financial Investment said in a note. Equity-linked securities are hybrid debt securities whose return is determined by the performance of underlying equity.

But not all were dealt heavy blows as Meritz Securities outshone its industry colleagues by posting net earnings of 114.2 billion won for the quarter, which is a 32 percent surge from the same period in 2017. The firm has reaped record high net profit of 433.9 billion won, compared to 355.2 billion won in the previous year.

Analysts also factored in a period of heightened stock market volatility in October last year, due to a lingering global trade war coupled with doubts about tech stock valuations in the US that triggered heavy net selling in Korean stocks.

But they also voiced hopeful outlooks for the industry’s first-quarter earnings this year, with the local market recently buoyed by signs of the government’s focus on the issue of lifting the stock transactions tax.

“As the stock market is rebounding from the beginning of the year, local brokerage firms will be able to file decent first-quarter earnings reports,” said Kang Seung-geon at HI Investment & Securities.

By Jung Min-kyung (